OPEB Deal Is In The Works

About $250 million needed in short term for retirement debt

July 19, 2011

WHEELING - West Virginia lawmakers are close to striking a deal to pay off the state's debt for health care retirement benefits for public employees - estimated to be as much as $8 billion, said acting Senate President Jeff Kessler.

He said legislators "made some headway" during interim sessions in determining what spending sources will be tapped to cover "other post employment benefit" costs. About $250 million is needed in the short term, according to Kessler, D-Marshall.

Previous legislation intended to shore up OPEB liabilities died in early March during the closing hours of the regular legislative session, as House and Senate leaders failed to reach a compromise.

Kessler said he is going to be speaking with House Speaker Richard Thompson, D-Wayne, and acting Gov. Earl Ray Tomblin in the next couple of weeks, "and maybe we can get something on the call for the special session in August."

Everything in House and Senate bills have been ironed out, and the bills are in agreement - how much would be necessary to pay, and for how long, he said.

"The issue now is where to come up with the money," Kessler said.

Lawmakers have been looking at putting controls in place to reduce the rate of medical inflation, and this move could reduce the long-term OPEB debt by as much as half, according to Kessler. He added that the workers' compensation debt will be paid off by 2016, after which the state will have an extra $90 million a year to pay toward OPEB.

The OPEB debt is estimated to last 19-30 years, according to Kessler.

He said legislators now have agreed that until that until 2016 the state will have to pay $50 million annually for state health care retirement benefits, and that $250 million must be found.

The House version of the legislation had proposed using dollars from the West Virginia's "rainy day fund" to pay down OPEB, while the Senate's bill didn't specify where the money would come from, he continued. The Senate bill only stipulated that lawmakers find a funding source by Jan. 1.

Kessler noted the Senate objected to the House version, as West Virginia's bond rating is contingent on the amount of money in its rainy day fund.

And just last week, the state's general obligation bond rating was upgraded from Aa2 to an Aa1 by Moody's Investors Service.

Kessler said it was "probably prudent" the Senate didn't agree in March to the House proposal.

"If the Senate president, the speaker and the acting governor sit down together, we should be able to identify a funding source," he said. "It's the last remaining financing concern in the state budget that causes us heartburn."